THE Nasdaq Composite has generated a total return of around 20% since the start of 2024, and some companies have significantly exceeded these returns in terms of stock performance. However, a stock’s performance over the course of a single year should never be the sole reason you decide to buy or sell.
Instead, there should be a clear business thesis underlying any stock you buy, and the company should align with the overall growth goals and risk tolerance levels you have set for your personal wallet. On that note, if you’re looking for stocks that are already skyrocketing this year and have intriguing businesses to drive long-term growth, here are two names to consider the next time you’re stock shopping.
1. Netflix
Netflix (NASDAQ:NFLX) is trading about 40% higher since the start of 2024. The streaming giant was a pandemic darling that subsequently angered investors as growth slowed and profitability declined. But he returned to regular gains after this difficult period.
Although Netflix has seen its market share decline in recent years due to increased competitiveness in the field, it still controls around 20% of the U.S. streaming market, as of this writing. However, the company remains the world’s leading streaming platform.
The company makes most of its money from recurring subscriptions. Its recent launch of an ad-based tier for a cheaper monthly rate also introduced ad revenue into the mix. The Company generates additional revenue through partnerships with vendors and other entertainment entities.
Netflix’s efforts to crack down on password sharing, diversify its revenue streams and offer more options to subscribers have breathed new life into its balance sheet. In the first quarter of 2024, revenue rose 15% year-over-year to $9.4 billion, while operating profit jumped 54% to $2.6 billion. The company ended the quarter with 269.6 million streaming subscriptions worldwide, a healthy 16% increase over the same quarter of 2023.
Netflix is ​​working to expand its membership base and make its platform more advertiser-friendly. Ad opt-ins increased 65% sequentially in the first quarter of 2024, following sequential increases of approximately 70% in the previous two quarters. The company’s advertising-based tier appears to be very popular: in markets where this tier is available, 40% of signups are for the advertising plan.
Additionally, the company is cash flow positive, generating approximately $2.1 billion in free cash flow in the most recent quarter alone.
Netflix is ​​still a powerhouse in the streaming space. Continuous innovation of its content and methods of delivering that content to subscribers is enabling solid growth after a difficult transition period. Investors may want to stay in the market or start a position in this top streaming stocks.
2. Chipotle Mexican Grill
Chipotle Mexican Grill (NYSE:CMG) has seen its shares rise about 47% since the start of this year, as the strength of its underlying business has enticed investors to get in on the action. The stock has been in the news lately for many reasons, including its upcoming record 50-for-1 stock split.
This will be one of the largest splits in the history of the New York Stock Exchange. Shareholders of record as of June 26 will own a stake in Chipotle valued at the same amount as before the split, but the price of each share will be about one-fiftieth of what it was before the split. In other words, starting June 26, shareholders will own 49 additional shares for every share they held before the split.
Stock splits do not impact a company’s value or market capitalization, but increase the number of shares outstanding while decreasing the cost of each share. This can make a stock that has become quite expensive much more accessible to investors.
Chipotle has a unique model in the fast-casual space in that it does not franchise any of its locations. Instead, all Sites are owned and operated by the Company. Its business model is simple: it earns revenue from sales at its restaurants and continues to leverage various competitive factors to expand its business potential, including fresh ingredients from quality sources, a relatively small menu, reasonable prices and a growing digital presence.
In 2023, 37% of its food and beverage revenue came from digital sales. Total revenue last year was just under $10 billion, an increase of 14% from 2022.
Chipotle opened 271 new restaurants last year, and most had Chipotlanes, its new drive-thru locations that allow customers to order online and pick up their order from the comfort of their vehicle. Total profits for the 12-month period were $1.2 billion, an increase of 37% from the previous year.
In the first quarter of 2024, total revenue increased 14% year-on-year to $2.7 billion, while net profit increased 23% to $359 million. Restaurant operating margins were 27.5% in the quarter, up 190 basis points year over year.
There is a lot to like about this title, its simple business model and its continued value proposition for the end consumer. As Chipotle stock is poised to become much more accessible after the stock split, this looks like a high restaurant stock to buy and hold for the long term, likely to generate generous returns in the years to come.
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Rachel Warren has no position in any of the stocks mentioned. The Motley Fool posts and recommends Chipotle Mexican Grill and Netflix. The Motley Fool has a disclosure policy.
2 Magnificent Growth Stocks That Outperformed the Nasdaq in 2024 and May Continue to Soar was originally published by The Motley Fool
